System and method for manufacturing and trading securities and commodities

ABSTRACT

Systems and methods are disclosed for a distributed trading system. The preferred invention offer solutions to problems that arise with High-Frequency Trading and the future of stock market regulation. The use of a distributed object brokered interface to facilitate transactions not only makes the trading faster but also more secure.

COPYRIGHT NOTICE

Contained herein is material that is subject to copyright protection.The copyright owner has no objection to the facsimile reproduction byanyone of the patent document or the patent disclosure, as it appears inthe United States Patent and Trademark Office patent file or records,but otherwise reserves all rights to the copyright whatsoever. Thefollowing notice applies to the software, screenshots and data asdescribed below and in the drawings hereto and All Rights Reserved.

RELATED FILINGS

This application is a divisional application of U.S. patent applicationSer. No. 15/669,870, entitled System and Method for Manufacturing andTrading Securities and Commodities, filed Aug. 4, 2017, which takespriority to U.S. Patent App. No. 62/371,098, entitled System and Methodfor Interconnectivity of Servers Within a Distributed Network, filedAug. 4, 2016, the entire contents of which are incorporated herein byreference.

Due to the complexity and diversity of the inventions it is necessary todisclose in a four application filing process, where the applicationsmay be a combination of continuations or continuations in part, and allincorporated by reference in their entirety. The first applicationentitled “System and Method for Distributed Trading Platform” claimspriority to provisional application 62/371,098 filed Aug. 4, 2016. Thisapplication will introduce a system of systems generally covered forboth context and continuity. Application one, herein, discloses anoverview of the systems elements as outlined in FIG. 26 with a specificfocus on the underlying communications architecture, and how it may beimplemented on a legacy trading network.

TECHNICAL FIELD

This disclosure relates generally to exchange trading systems andservers, operating in a coordinated, centralized and integrated systemsof computers and servers; and the evolution to the simultaneousimplementation of new systems and methods for a communicationsinfrastructure across legacy systems that are implemented such that adistributed trading architecture operating across the legacy systems canoperate independently on diverse platforms.

BACKGROUND

This disclosure relates generally to exchange trading systems andservers, operating in a coordinated, centralized and integrated systemsof computers and servers; and the evolution to the simultaneousimplementation of new systems and methods for a communicationsinfrastructure across legacy systems that are implemented such that adistributed trading architecture operating across the legacy systems canoperate independently on diverse platforms.

This approach allows collaboration between systems running on differentoperating systems, programming languages, and computing hardware tooperate as distributed objects using remote method invocations formessage passing through communications primitives. This occurs betweenOSI layers 2-4 and bound down at layer 5. This system is predicated onthe use of one centralized server or collocated bank of serversoperating as one, this is done to facilitate, and speed up electronictrading for the distributed trading system. Further, the distributedtrading system implements a centralized ledger, centralizedauthentication and distributed information transfer between parties.

Generally, the application discloses implementing a Blockchain Ledger insupport of a distributed ledger based peer to peer transaction, executedin a centralized server of a licensed exchange operating on a legacynetwork. The invention discloses an embodiment of communicating acrossthe existing networks by implementing an object request brokeredcommunications channel for message passing in support of a centralizedleger that documents a distributed secure peer to peer transaction.

Within the current network structure of Public Stock Exchanges, thereare inefficiencies that can be solved by a proprietary application ofemerging technologies. Currently a registered broker dealer must dealwith many middle men, and stops when fulfilling a trade. This can beerradicated by the inclusion of a Distributed Market Exchange. Byremoving a centralized server for order matching, an inclusion of peerto peer transaction may not only make trading faster and more secure. Itmay negate and eliminate the ability for firms outside of the onesengaging in trade to influence the trade, for example front-running oftrades would be impossible. This system may be completely compliant withupcoming SEC regulations and future proof the market against otheremerging technologies.

High-frequency trading (HFT) is a program trading platform that usespowerful computers to transact a large number of orders at very fastspeeds. High-frequency trading uses complex algorithms to analyzemultiple markets and execute orders based on market conditions.Typically, the traders with the fastest execution speeds are be moreprofitable than traders with slower execution speeds. As of 2009, it isestimated more than 50% of exchange volume comes from high-frequencytrading orders.

Front running is the unethical practice of a stockbroker executingorders on a security for its own account while taking advantage ofadvance knowledge of pending orders from its customers. The frontrunning broker either buys for its own account before filling customerbuy orders that drive up the price, or sells for its own account beforefilling customer sell orders that drive down the price. Front running isconsidered unethical since the broker is making a profit at the directexpense of its own customers. Companies can achieve this fasterinformation through co-location.

Co-locating computers owned by HFT firms and proprietary traders in thesame premises where an exchange's computer servers are housed, enablesHFT firms to access stock prices a split second before the rest of theinvesting public. Co-location has become a lucrative business forexchanges, which charge HFT firms millions of dollars for the privilegeof “low latency access.” As Lewis explains in “Flash Boys,” the hugedemand for co-location is a major reason why some stock exchanges haveexpanded their data centers substantially. While the old New York StockExchange building occupied 46,000 square feet, the NYSE Euronext datacenter in Mahwah, N.J. is almost nine times larger, at 398,000 squarefeet.

A type of HFT trading wherein an exchange will “flash” information aboutbuy and sell orders from market participants to HFT firms for a fewfractions of a second before the information is made available to thepublic. Flash trading is controversial because HFT firms can use thisinformation edge to trade ahead of pending orders, which can beconstrued as front running. U.S. Senator Charles Schumer had urged theSecurities and Exchange Commission in July 2009 to ban flash trading,saying that it created a two-tiered system where a privileged groupreceived preferential treatment, while retail and institutionalinvestors were put at an unfair disadvantage and deprived of a fairprice for their transactions.

The time that elapses from the moment a signal is sent to its receipt.Since lower latency equals faster speed, high-frequency traders spendheavily to obtain the fastest computer hardware, software and data linesso as execute orders as speedily as possible and gain a competitive edgein trading. The biggest determinant of latency is the distance that thesignal has to travel, or the length of the physical cable (usuallyfiber-optic) that carries data from one point to another. Since light ina vacuum travels at 186,000 miles per second or 186 miles a millisecond,a HFT firm with its servers co-located right within an exchange wouldhave a much lower latency—and hence a trading edge—than a rival firmlocated miles away. Interestingly, an exchange's co-location clientsreceive the same amount of cable length regardless of where they arelocated within the exchange premises, so as to ensure that they have thesame latency.

Bitcoin is a digital asset and a payment system invented by SatoshiNakamoto. Nakamoto introduced the idea on 31 Oct. 2008 to a cryptographymailing list, and released it as open-source software in 2009. Therehave been several high profile claims to the identity of SatoshiNakamoto; however, none of them have provided proof beyond doubt thatback up their claims.

The system is peer-to-peer and transactions take place between usersdirectly, without an intermediary. These transactions are verified bynetwork nodes and recorded in a public distributed ledger called theblockchain, which uses bitcoin as its unit of account. Since the systemworks without a central repository or single administrator, the U.S.Treasury categorizes bitcoin as a decentralized virtual currency.Bitcoin is often called the first cryptocurrency, although prior systemsexisted and it is more correctly described as the first decentralizeddigital currency. Bitcoin is the largest of its kind in terms of totalmarket value.

Bitcoins are created as a reward for payment processing work in whichusers offer their computing power to verify and record payments into apublic ledger. This activity is called mining and miners are rewardedwith transaction fees and newly created bitcoins. Besides being obtainedby mining, bitcoins can be exchanged for other currencies, products, andservices. When sending bitcoins, users can pay an optional transactionfee to the miners.

In February 2015, the number of merchants accepting bitcoin for productsand services passed 100,000. Instead of 2-3% typically imposed by creditcard processors, merchants accepting bitcoins often pay fees in therange from 0% to less than 2%. Despite the fourfold increase in thenumber of merchants accepting bitcoin in 2014, the cryptocurrency didnot have much momentum in retail transactions. The European BankingAuthority and other sources have warned that bitcoin users are notprotected by refund rights or chargebacks. The use of bitcoin bycriminals has attracted the attention of financial regulators,legislative bodies, law enforcement, and media. Criminal activities areprimarily centered around darknet markets and theft, though officials incountries such as the United States also recognize that bitcoin canprovide legitimate financial services.

A blockchain is a public ledger of all Bitcoin transactions that haveever been executed. It is constantly growing as ‘completed’ blocks areadded to it with a new set of recordings. The blocks are added to theblockchain in a linear, chronological order. Each node (computerconnected to the Bitcoin network using a client that performs the taskof validating and relaying transactions) gets a copy of the blockchain,which gets downloaded automatically upon joining the Bitcoin network.The blockchain has complete information about the addresses and theirbalances right from the genesis block to the most recently completedblock.

Typical exchanges today operate on private networks and private serversbehind deep firewalls. They offer access to their system through acomputer configured to access their network for receiving information,or allowing trade information messages to occur. As an example,Bloomberg's Trade book operates behind the global Bloomberg network.Making wholesale changes to these networks are difficult or nearimpossible. They have been build up over the years to meet the numerousmissions Bloomberg operating companies require; gaining access for anypurpose requires years of planning. The precious metals trading platformthis application proposes may implement on an existing platform acrosslegacy networks with an existing exchange for many strategic reasons,including credibility, access, regulations.

The challenge for this will be disruption to any other operation usingthe closed system of networks and servers. This implementation would befurther complicated by using the centralized proxy based system with adecentralized system pointed to a single server for ledger management.

The utilization of a distributed ledger is the most robust technologicaladvancement in transaction mechanisms within the last decade. Applicableto a plurality of opportunities, the system and methods disclosed hereinutilize a distributed ledger and authentication system through aspecialized process. The invention may use a distributed ledger torepresent a basket of rare-earth metals, track the distribution of thisbasket through a shipping network, create a coin representing the marketvalue of the basket, trade the coin on an exchange network, and maintainand optimize the fulfillment and ultimate delivery of the basket to itsending location.

An exchange-traded fund (ETF) is an investment fund traded on stockexchanges, much like stocks. An ETF holds physical assets such asstocks, bonds or commodities. With a focus on the last, the applicantscite as a non-limiting example of an ETF, precious metals backed ETFs,e.g. SPDR Gold Shares ETF; iShares Silver Trust ETF; and ETFS (GLTR)Precious Metals Baskets Trust. GLTR, it is a physically backed ETF withbroader baskets of physical metals, rather than holding just oneprecious metal its portfolio includes physical gold, physical silver,physical platinum and physical palladium. Each of these ETFs sited abovegenerally operate with an arbitrage mechanism designed to keep ittrading close to its net asset value, although deviations canoccasionally occur. Most ETFs track an index, such as a stock index orbond index. ETFs may be attractive as investments because of their lowcosts, tax efficiency, and stock-like features. By 2013, ETFs had becomethe most popular type of exchange-traded product.

Generally, all ETFs derive their value from the current value of anunderlying portfolio of assets. The ETF is traded intraday on the sameexchange as the underlying basket creating arbitrage opportunities.These arbitrage opportunities stabilize the price of the ETF forcing itsNet Asset Value (NAV) to avoid being over or undervalued relative to thebasket of its representative portfolio. The basket of rare earth metalswill behave similarly. The current market value of individualcommodities contained therein will value the basket. Although thebasket's value will fluctuate due to market demand, on the delivery ofthe contract the value will revert to the NAV. This put-call parity is anormal occurrence within a market involving derivatives and thearbitrage opportunities are expected.

What is needed are systems and methods the allows the formation of adistributed network bound down to the networks at layer 5, pointed to aserver and port, where it is picked off by a network appliancecollocated proximate to the servers, wherein the appliance is configuredto forward traffic to a second server, carrying messages to the secondserver to be incorporate in a record related to the messages, and storedback in the second server. The key to this approach is messaging suchthat the traffic and messages are “invisible” to the legacy networks.

Aspects and applications presented here are described below in thedrawings and detailed description. Unless specifically noted, it isintended that the words and phrases in the specification and the claimsbe given their plain, ordinary, and accustomed meaning to those ofordinary skill in the applicable arts. The inventors are fully awarethat they can be their own lexicographers if desired. The inventorsexpressly elect, as their own lexicographers, to use only the plain andordinary meaning of terms in the specification and claims unless theyclearly state otherwise and then further, expressly set forth the“special” definition of that term and explain how it differs from theplain and ordinary meaning. Absent such clear statements of intent toapply a “special” definition, it is the inventors' intent and desirethat the simple, plain and ordinary meaning to the terms be applied tothe interpretation of the specification and claims.

The inventors are also aware of the normal precepts of English grammar.Thus, if a noun, term, or phrase is intended to be furthercharacterized, specified, or narrowed in some way, then such noun, term,or phrase will expressly include additional adjectives, descriptiveterms, or other modifiers in accordance with the normal precepts ofEnglish grammar. Absent the use of such adjectives, descriptive terms,or modifiers, it is the intent that such nouns, terms, or phrases begiven their plain, and ordinary English meaning to those skilled in theapplicable arts as set forth above.

Further, the inventors are fully informed of the standards andapplication of the special provisions of 35 U.S.C. § 112, ¶6. Thus, theuse of the words “function,” “means” or “step” in the DetailedDescription or Description of the Drawings or claims is not intended tosomehow indicate a desire to invoke the special provisions of 35 U.S.C.§ 112, ¶6, to define the systems, methods, processes, and/or apparatusesdisclosed herein. To the contrary, if the provisions of 35 U.S.C. § 112,¶6 are sought to be invoked to define the embodiments, the claims willspecifically and expressly state the exact phrases “means for” or “stepfor, and will also recite the word “function” (i.e., will state “meansfor performing the function of . . . ”), without also reciting in suchphrases any structure, material or act in support of the function. Thus,even when the claims recite a “means for performing the function of . .. ” or “step for performing the function of . . . ”, if the claims alsorecite any structure, material or acts in support of that means or step,or that perform the recited function, then it is the clear intention ofthe inventors not to invoke the provisions of 35 U.S.C. § 112, ¶6.Moreover, even if the provisions of 35 U.S.C. § 112, ¶6 are invoked todefine the claimed embodiments, it is intended that the embodiments notbe limited only to the specific structure, material or acts that aredescribed in the preferred embodiments, but in addition, include any andall structures, materials or acts that perform the claimed function asdescribed in alternative embodiments or forms, or that are well knownpresent or later-developed, equivalent structures, material or acts forperforming the claimed function.

BRIEF DESCRIPTION OF THE FIGURES

A more complete understanding of the systems, methods, processes, and/orapparatuses disclosed herein may be derived by referring to the detaileddescription when considered in connection with the followingillustrative figures. In the figures, like-reference numbers refer tolike-elements or acts throughout the figures. The presently preferredembodiments are illustrated in the accompanying drawings, in which:

FIG. 1 depicts the Open Systems Interconnect Model (OSI Model).

FIG. 2 depicts the terminal description.

FIG. 3 depicts the basic datagram between two terminals.

FIG. 4 depicts a SOCKS5 proxy

FIG. 5 depicts a datagram with a SOCKS5 proxy.

FIG. 6 depicts an OSI connectivity model.

FIG. 7 depicts a traditional stock market exchange connection model.

FIG. 8 depicts two companies connected to similar servers.

FIG. 9 depicts a single firm trade timing diagram.

FIG. 10 depicts a front running timing diagram.

FIG. 11 depicts three companies connecting to stock exchange servers.

FIG. 12 depicts a traditional trade.

FIG. 13 depicts a front running trade.

FIG. 14 depicts Bitcoin's Blockchain.

FIG. 15 depicts a simple Distributed Object Brokered Interface.

FIG. 16 depicts an OSI Model with ORB proxy.

FIG. 17 depicts an ORB proxy.

FIG. 18 depicts a representation of differentiation in code betweendistributed objects by type.

FIG. 19 depicts a decentralized market exchange diagram.

FIG. 20 depicts connection sets amongst items in the decentralizedmarket exchange diagram.

FIG. 21 depicts the ledger distribution after trade.

FIG. 22 depicts the portfolio distribution after trade.

FIG. 23 depicts an example of matching full order volume when spreadbetween decentralized and centralized exchanges.

FIG. 24 depicts the distributed router network.

FIG. 25 depicts common object request brokered architectures.

FIG. 26 depicts an overview of the system of systems.

Elements and acts in the figures are illustrated for simplicity and havenot necessarily been rendered according to any particular sequence orembodiment.

DESCRIPTION

In the following description, and for the purposes of explanation,numerous specific details, process durations, and/or specific formulavalues are set forth in order to provide a thorough understanding of thevarious aspects of exemplary embodiments. It will be understood,however, by those skilled in the relevant arts, that the apparatus,systems, and methods herein may be practiced without these specificdetails, process durations, and/or specific formula values. It is to beunderstood that other embodiments may be utilized and structural andfunctional changes may be made without departing from the scope of theapparatus, systems, and methods herein. In other instances, knownstructures and devices are shown or discussed more generally in order toavoid obscuring the exemplary embodiments. In many cases, a descriptionof the operation is sufficient to enable one to implement the variousforms, particularly when the operation is to be implemented in software.It should be noted that there are many different and alternativeconfigurations, devices, and technologies to which the disclosedembodiments may be applied. The full scope of the embodiments is notlimited to the examples that are described below.

In the following examples of the illustrated embodiments, references aremade to the accompanying drawings which form a part hereof, and in whichis shown by way of illustration various embodiments in which thesystems, methods, processes, and/or apparatuses disclosed herein may bepracticed. It is to be understood that other embodiments may be utilizedand structural and functional changes may be made without departing fromthe scope.

The utilization of a distributed ledger is the most robust technologicaladvancement in transaction mechanisms within the last decade. Applicableto a plurality of opportunities, the systems and methods disclosedherein utilize a distributed ledger and authentication system through aspecialized process. A distributed ledger may be used to represent abasket of rare-earth metals, track the distribution of this basketthrough a shipping network, create a coin representing the market valueof the basket, trade the coin on an exchange network, and maintain andoptimize the fulfillment and ultimate delivery of the basket to itsending location.

Coal burning power plants, regardless of whether or not they areproducing energy that is used, produce a byproduct known as fly ash.Normally considered a waste product, fly ash is not only costly totransport but costly to store due to environmental regulation. Through aproprietary process rare earths and other commodities may be extractedfrom fly ash and other metal-bearing feedstock. These extractedmaterials may be represented by a basket. The basket of materials may betraded on a commodities exchange in order for liquidation. Theexpectation is that coal burning power plants will subscribe to thenetwork in order to monetize their waste product. Coal-burning powerplants and fly ash are used as examples herein but these same systemsand methods may be applied to other plants and waste streams notexplicitly disclosed herein.

Due to the high volume of rare earth metals in fly ash, traditionalcommodities exchanges will not work due to price sensitivity. The use ofproprietary distributed ledger technology is necessary in order torevolutionize the process. Each basket of rare earth metals created willbe assigned a hash-code on the distributed ledger. This hash-code willremain alive throughout the life of the basket, timing out on itseventual delivery. The ledger will also provision each user with ahash-code that will be applied to a basket indicating current ownership.The code will also represent the basket of rare earth metals to betraded on a proprietary exchange. Users will also be able to tradederivative contracts based on future delivery of the basket using asmart contract application in place.

An exchange-traded fund (ETF) is an investment fund traded on stockexchanges, much like stocks. An ETF holds physical assets such asstocks, bonds or commodities. With a focus on the last, the applicantscite as a non-limiting example of an ETF, precious metals backed ETFs,e.g. SPDR Gold Shares ETF; iShares Silver Trust ETF; and ETFS (GLTR)Precious Metals Baskets Trust. GLTR, it is a physically backed ETF withbroader baskets of physical metals, rather than holding just oneprecious metal its portfolio includes physical gold, physical silver,physical platinum and physical palladium. Each of these ETFs sited abovegenerally operate with an arbitrage mechanism designed to keep ittrading close to its net asset value, although deviations canoccasionally occur. Most ETFs track an index, such as a stock index orbond index. ETFs may be attractive as investments because of their lowcosts, tax efficiency, and stock-like features. By 2013, ETFs had becomethe most popular type of exchange-traded product.

Generally, all ETFs derive their value from the current value of anunderlying portfolio of assets. The ETF is traded intraday on the sameexchange as the underlying basket creating arbitrage opportunities.These arbitrage opportunities stabilize the price of the ETF forcing itsNet Asset Value (NAV) to avoid being over or undervalued relative to thebasket of its representative portfolio. The basket of rare earth metalswill behave similarly. The current market value of individualcommodities contained therein will value the basket. Although thebasket's value will fluctuate due to market demand, on the delivery ofthe contract the value will revert to the NAV. This put-call parity is anormal occurrence within a market involving derivatives and thearbitrage opportunities are expected.

The proprietary exchange itself will operate and fluidly maintain adistributed network through a plurality of micro networks amongst itsusers. The micro networks will operate transactions within a smallnumber of users. This increases the speed and efficiency of the exchangenetwork. At predetermined time intervals, each user will send their mostup to date chain of transactions representing the net change in assetsover the time-period to a centralized exchange for compilation and theother networks of users. The centralized exchange will document andstore the complete ledger in order to mitigate the threat of fraudulenttransactions. The exact specifications and definition of thetransactions are defined therein.

The centralized network of servers may manage the manufacture anddistribution network of products in and from the process. Thedistributed ledger offers unparalleled accuracy in supply chainmanagement, consistently maintaining an accurate location in theprocess. This will limit or completely negate the potential loss ofmaterial in the process and further develop the intricate system.Successful implementation will not only redefine commodities trading butalso supply chain management.

In a non-limiting example, implementing a Common Object Request BrokeredArchitecture, or CORBA, enables communication between software writtenin different languages and running on different computers.Implementation details from specific operating systems, programminglanguages, and hardware platforms are all removed from theresponsibility of developers. CORBA normalizes the method-call semanticsbetween application objects residing either in the same address-space(application) or in remote address-spaces (same host, or remote host ona network). Version 1.0 was released in October 1991.

CORBA uses an interface definition language (IDL) to specify theinterfaces that objects present to the outer world. CORBA then specifiesa mapping from IDL to a specific implementation language like C++ orJava. Standard mappings exist for Ada, C, C++, C++11, COBOL, Java, Lisp,PL/I, Object Pascal, Python, Ruby and Smalltalk. Non-standard mappingsexist for C#, Erlang, Perl, Tcl and Visual Basic implemented by objectrequest brokers (ORBs) written for those languages.

The CORBA specification dictates there shall be an ORB through which anapplication would interact with other objects. This is how it isimplemented in practice:

The application simply initializes the ORB, and accesses an internalObject Adapter, which maintains things like reference counting, object(and reference) instantiation policies, and object lifetime policies.

The Object Adapter is used to register instances of the generated codeclasses. Generated code classes are the result of compiling the user IDLcode, which translates the high-level interface definition into an OS-and language-specific class base for use by the user application. Thisstep is necessary in order to enforce CORBA semantics and provide aclean user process for interfacing with the CORBA infrastructure.

Some IDL mappings are more difficult to use than others. For example,due to the nature of Java, the IDL-Java mapping is ratherstraightforward and makes usage of CORBA very simple in a Javaapplication. This is also true of the IDL to Python mapping. The C++mapping requires the programmer to learn datatypes that predate the C++Standard Template Library (STL). By contrast, the C++11 mapping iseasier to use, but requires heavy use of the STL. Since the C languageis not object-oriented, the IDL to C mapping requires a C programmer tomanually emulate object-oriented features.

In order to build a system that uses or implements a CORBA-baseddistributed object interface, a developer must either obtain or writethe IDL code that defines the object-oriented interface to the logic thesystem will use or implement. Typically, an ORB implementation includesa tool called an IDL compiler that translates the IDL interface into thetarget language for use in that part of the system. A traditionalcompiler then compiles the generated code to create the linkable-objectfiles for use in the application.

FIG. 1 depicts physical method for the Open Systems Interconnectionmodel (OSI model) which is a conceptual model that characterizes andstandardizes the communication functions of a telecommunication orcomputing system without regard to their underlying internal structureand technology. Its goal is the interoperability of diversecommunication systems with standard protocols. The model partitions acommunication system into abstraction layers. The original version ofthe model defined seven layers. A layer serves the layer above it and isserved by the layer below it. For example, a layer that provideserror-free communications across a network provides the path needed byapplications above it, while it calls the next lower layer to send andreceive packets that comprise the contents of that path. Two instancesat the same layer are visualized as connected by a horizontal connectionin that layer.

The focus of this application is a session based (layer 5) binding downto 4-2 using and exploiting the primitive messaging between the layersto invoke an object request brokered communication to effect a “blackchannel” communication in an existing network to not disrupt operationsof the networks stock exchange system. The Black Channel effectivelysupports what is termed an asset backed “dark pool” of securities.

FIG. 2 depicts terminal A and terminal B sitting on a trading desk,riding on the same networks and connected to the same local server 5,where 5 is pointed to a second server, in support of stock trades, whereterminal B is in support of dark pool asset trades.

FIG. 3 better illustrates the standard trading platform 10 collocatedwith Dark Terminal B 20 riding on the same local networks and localserver 5, both pointed to a second server. The trading terminal bound bySOCKS5 and the dark terminal bound for layer 2 forwarding through theblack channel. The black channel data is bound out through the Blackchannel stacks in the Terminal B Dark Pool process 43.

FIG. 4 illustrates the preferred embodiment for the physical method fora SOCKS5 Proxy 50. Socket Secure (SOCKS) is an Internet protocol thatexchanges network packets between a client and server through a proxyserver. SOCKS5 additionally provides authentication so only authorizedusers may access a server. Practically, a SOCKS5 server proxies TCPconnections to an arbitrary IP address, and provides a means for UDPpackets to be forwarded. Without the specific SOCKS5 address, the datacannot pass through the proxy to the server or output location.

FIG. 5 illustrates the preferred embodiment for the physical method fora SOCKS5 Proxy as represented in the datagram of the OSI Model. The OSIModel is displayed to show the transfer of information from anapplication running on Terminal A to a similar application on Terminal C30. The model is expanded to show the suffixes and prefixes added to thedata (represented by [DATA]) to facilitate the transfer of informationbetween layers. At Layer 5, the session layer, a SOCKS5 proxy is addedand this change is delineated by the “(S5)” suffix and prefix to thenetworking packet. Both the server the networking packet passes throughand Terminal B have the SOCKS5 proxy to allow the information through.If these did not have the SOCKS5 proxy, the information would beabandoned.

FIG. 6 illustrates the preferred embodiment for the physical method foran OSI Connectivity Model. The OSI Model is displayed to show thetransfer of information from an application running on Terminal A to asimilar application on Terminal C. In this case, the information isbound down to the network Layer at Layer 3 then connected through aserver via a SOCKS5 Proxy then passed on to Terminal C.

FIG. 7 illustrates the preferred embodiment for the physical method of atraditional stock exchange connection model. In the traditional stockexchange model, a company consists of a plurality of Terminals eachconnected to a Trade Server. The trade server connects to each of theStock Exchange Servers.

FIG. 8 illustrates the preferred embodiment for the physical method of atraditional stock exchange connection model with at least two companiesconnected to the various exchanges.

FIG. 9 illustrates the preferred embodiment for the physical method forthe timing of a trade originating from a single source, and beingdelivered to a plurality of sources. When a trade server sends out anorder for stocks, currently they are all sent at the same time. Butbecause of latency issues they reach the different exchanges atdifferent times. This causes issues when executing orders that exceedthe volume held in at least one exchange. The speed of the transactionis almost entirely dependent on the location of the Broker/Dealer inreference to the exchange.

FIG. 10 illustrates the preferred embodiment for the physical method ofan example of front running. Front running is the unethical practice ofa broker trading an equity in his personal account based on advancedknowledge of pending orders from the brokerage firm or from clients,allowing him to profit from the knowledge. It can also occur when abroker buys shares in his personal account ahead of a strong buyrecommendation that the brokerage firm is going to make to its clients.Front running is possible because one broker may be closer to a certainexchange and can then race their order in front of another order (theoriginal order) to pull their shares, replacing them at a higher priceor buy the shares and replace them at a higher price.

FIG. 11 illustrates the preferred embodiment for the physical method ofat least three companies connecting to a plurality of stock exchangeservers.

FIG. 12 illustrates the preferred embodiment for the physical method ofa traditional trade between two companies. This diagram shows ahypothetical order where Company B has posted 100 shares at $1.00/shareacross three exchanges. Company A wishes to purchase these shares. Attime 0, Company B posts the shares on the three stock exchanges withvolumes of 20, 30, and 50, respectively. At time 1, the trader operatingthe terminal at company A puts in the order for 100 shares for $100. Attime 2, the trade server looks to the exchanges to check their volumesand all at one time blasts out an order for the shares, eventuallymatching the volume necessary to complete the order. At time 2.1, thetrade is complete and Company A receives the shares, Company B iscompensated for the sale of securities.

FIG. 13 illustrates the preferred embodiment for the physical method ofan example of front running using the model presented in FIG. 12. Thisdiagram shows a hypothetical order where Company B has posted 100 sharesat $1.00/share across three exchanges. Company A wishes to purchasethese shares. At Time 0, Company B posts the shares on the three stockexchanges with volumes of 20, 30, and 50, respectively. At time 1, thetrader operating the terminal at company A puts in the order for 100shares for $100. At time 2, the trade server looks to the exchanges tocheck their volumes and all at one time blasts out an order for theshares, eventually matching the volume necessary to complete the order.At time 3, Company C engages in front running by seeing Company A'sorder to the first stock exchange which has a volume of 20 shares, thengoes to the other two exchanges to buy the other shares before Company Acan reach them. Company B receives the money from all of the shares,Company A gets the 20 shares executed at a price of $20.00. Company Cthen places the shares of the other two exchanges back on the market at$1.01 a share. At time 4, Company A's algorithm allows the trade to becontinued even with the higher price. At time 4.1, Company A receivesthe other 80 shares at $80.80 and company C receives a profit of $0.80on the trade

FIG. 14 illustrates the preferred embodiment for the physical method ofan example of the cryptocurrency, Bitcoin's, blockchain and itsprocesses. Blockchain can be thought of as a publicly distributed ledgerfor transactions between two parties. When a transaction was madebetween two parties, the block in the ledger would be updated when twoor more entities not involved in the transaction authenticate the trade.Once the trade is authenticated, the object (currency, stock, preciousmetals, etc.) changes ownership. This negates the need for a physicaltransferable object. It becomes virtually impossible to cheat the systemas everyone has access to the public ledger. The cryptocurrency,Bitcoin, implemented a blockchain as a way of securing transactionswhile keeping the two agents of the trade anonymous. The publicity ofthe ledger (a representation of which can be found at blockchain.info)offers an extra level of security for the cryptocurrency as anyone canview and check the ledger for inconsistencies. Step 1 involves fourparties in the trade (A, B, C, and D) the public Ledger (blockchain)would include blocks of previous trades. The lines represent thepossible connections between the four agents of trade. Step 2 shows thetransaction between A and D, where D is the seller and A is the buyer. Abecomes the new owner of the bitcoin, and D receives compensation fromA. Normally for the bitcoin ledger, it will not show the monetarytransaction, but for sake of example it is included to show a widervariance in possibilities. The transaction creates a block in theblockchain. The transaction is not effective until the ledger isverified by at least one other party not included in the transaction.Step 3 represents, the ledger held by both agents A and D being sent outto their neighbors, B and C. The two ledgers must match for the bitcointo change assignment. Finally, once the transaction is verified theledger is updated to show an authenticated trade and the bitcoin isassigned to its new owner. The average time for the authentication isaround 8 to 10 minutes (Step 4). There is no physical representation ofthe Bitcoin cryptocurrency, each bitcoin is issued at 64-bit address.Each agent of trade is also issued a 64-bit address that is referred toas their “wallet”. When a bitcoin is transacted the ledger changes theassociation of the bitcoin address to the new owner's wallet address tocomplete the transaction. Before this assignment takes place, the ledgeris referenced to ensure that the current owner of the bitcoin hascomplete ownership. This authentication is done through blocks ofservers referred to as miners. “Miners” or parties who run servers toauthenticate the transaction are compensated in bitcoin for every210,000 blocks of transactions that they authenticate. The miners aregiven a program that automatically finds blocks to authenticate andupdates the ledger for every transaction. By having the ledger bedistributed between pluralities of users, it secures the transactions bymaking cheating the system virtually impossible. If the transactionledgers do not match up then the transaction is voided and notcompleted. Whenever a trade is initialized the program distributed tothe miners queries the distributed ledger searching for the path ofbitcoin, to ensure the initial owners are the true owners of the coin.If everything checks out the transaction continues following the stepslisted above.

FIG. 15 illustrates the preferred embodiment for the physical method ofa simple diagram representing the Distributed Object Brokered Interface.In distributed computing, an object request broker (ORB) is a middlewarewhich allows program calls to be made from one computer to another via acomputer network, providing location transparency through remoteprocedure calls. ORBs promote interoperability of distributed objectsystems, enabling such systems to be built by piecing together objectsfrom different vendors, while different parts communicate with eachother via the ORB. Each aspect within the distribution can directlyconnect to another, without the need for a middle man to transact thecommunication.

FIG. 16 illustrates the preferred embodiment for the physical method ofthe application of the OSI Model with an ORB Proxy. Within the expandedOSI model, the interconnectivity of two terminals happens by bindingdown the communication to the DATA Link which operates within CORBA anda Layer 5 ORB Proxy. The Common Object Request Broker Architecture(CORBA) is a standard defined by the Object Management Group (OMG)designed to facilitate the communication of systems that are deployed ondiverse platforms. CORBA enables collaboration between systems ondifferent operating systems, programming languages, and computinghardware. CORBA uses an object-oriented model although the systems thatuse CORBA do not have to be object-oriented. CORBA is an example of thedistributed object paradigm.

FIG. 17 illustrates the preferred embodiment for the physical methodrepresenting the ORB Proxy. If the client is behind a very restrictivefirewall or transparent proxy server environment that only allows HTTPconnections to the outside through port 80, communication may beimpossible, unless the proxy server in question allows the HTTP CONNECTmethod or SOCKS connections as well. At one time, it was difficult evento force implementations to use a single standard port—they tended topick multiple random ports instead. As of today, current ORBs do havethese deficiencies. Due to such difficulties, some users have madeincreasing use of web services instead of CORBA. These communicate usingXML/SOAP via port 80, which is normally left open or filtered through aHTTP proxy inside the organization, for web browsing via HTTP. RecentCORBA implementations, though, support SSL and can be easily configuredto work on a single port. Some ORBS, such as TAO, omniORB and JacORBalso support bidirectional GIOP, which gives CORBA the advantage ofbeing able to use callback communication rather than the pollingapproach characteristic of web service implementations. Also, mostmodern firewalls support GIOP & IIOP and are thus CORBA-friendlyfirewalls.

FIG. 18 is a representation of the differentiation of code betweendistributed objects. Each company within the new proposed system willhave a plurality of terminals connected to a trade server. The terminalswill have a distributed object brokered interface that is a specificcode set to the terminals. Only the terminals within a company will beable to talk to that company's trade server. The trade server of eachcompany will have a distributed object brokered interface that is nestedwithin a specific router, allowing the server to connect to theinformation exchange. It protects the interface by not exposing thesource code in any way to the trade server. The authentication serveralso has a distributed object brokered interface which can authenticateany transactions that occur between two trading servers through therouters. The routers and the authentication server also have specificcode blocks representative of their specific use within the system. Thedistributed object within the system can only be communicated to by thespecific router, and that router can only accept information from otherrouters or the authentication server.

FIG. 19 illustrates the preferred embodiment for the physical method ofa Decentralized Market Exchange. This diagram represents the model ofhow an exchange would function. The actual exchange consists of aplurality of companies that are interconnected through the routers thatare nested within their trading servers. The company specific terminalshave access to market information that is supplied through the routersspecifically. These peer to peer transactions only need a centralizedauthentication server to ensure the fairness of all of the trades thatpass within the “cloud-based” exchange. In theory, the AuthenticationServer is not directly part of the exchange but acts as a storagemechanism to facilitate the audit trail of the transactions.

FIG. 20 illustrates the preferred embodiment for the physical method ofthe connection sets between members of the distributed network.Connection set 1—the interconnection between the terminals of variouscompanies allows for a speedier information transfer from their companyspecific routers when facilitating trades. If a trade is facilitatedthen it passes to connection set 2. Connection set 2—this connectionshows the distribution of the exchange where the transfer happensbetween the two routers, but is authorized by the externalAuthentication Server.

FIG. 21 illustrates the preferred embodiment for the physical method ofthe ledger distribution following a trade in the decentralized system.This represents a transaction between Company A and Company B followingthe ledger. At time 1, a trade is initiated between a Terminal atCompany A and a terminal at Company B. The routers within the tradeservers also execute the transaction at the time of the trade. At time2, Company A's ledger represent A buying from B and Company B's ledgerrepresents B selling to A. This information is passed from thedistributed object within the terminal to the specific distributedobject within a specific router. At time 3, the two ledgers are thenpassed down to the Authentication Server. At time 4 because the twoledgers match, the trade is authenticated and stored within the MasterLedger.

FIG. 22 illustrates the preferred embodiment for the physical method ofthe portfolio distribution after a trade. This diagram follows theportfolio of a transaction between Company A and Company B. At time 1,once the trade has been initiated between the two terminals at Company Aand Company B, their portfolio immediately changes to represent thetransaction. Company A adds the product and loses the money. Theopposite happens for Company B. At times 2-4 the similar ledgerauthentication steps occur as listed in FIG. 21. At step 5, theauthentication server sends back a confirmation code to the Routersallowing those objects of the transaction to be traded again.

FIG. 23 illustrates the preferred embodiment for the physical method formatching full order volume when volume is spread between Decentralizedand Centralized Exchanges. Company A wants to buy 100 shares of CompanyB for $100 but the decentralized exchange cannot match the order volume.At time 0, Company B posts 50 shares of its stock to both theDecentralized Market Exchange and the Stock Exchange Server for a totalof 100 shares at $100. At time 1, Company A posts a buy order for 100shares at $100 dollars. This follows the diagrams in slides 21, 22. Attime 2, only 50 of those shares are transacted as the portfolio changes,as that was the volume from the Decentralized market exchange. At time3, when the ledger is sent from the routers within the company to theAuthentication server, it becomes known that Company A still wishes tobuy 50 more shares of Company B to complete their order. At time 4, theauthentication server then acts on the behalf of Company A to see thatthe Stock Exchange Server with the distributed object brokered interfacehas the necessary volume to complete the trade. At time 5, the sharesare assigned to company A.

FIG. 24 provides an overview of Cisco Transport Manager in ageographically redundant high availability configuration with thecluster configuration connected to a switch or router network. Eachlocation consists of a one- or two-node Cisco Transport Manager localredundancy configuration (a two-node configuration is shown).

FIG. 25 illustrates the high-level paradigm for remote inter-processcommunications using CORBA. The CORBA specification further addressesdata typing, exceptions, network protocols, communication timeouts, etc.For example: Normally the server side has the Portable Object Adapter(POA) that redirect calls either to the local servants or (to balancethe load) to the other servers. The CORBA specification (and thus thisfigure) leaves various aspects of distributed system to the applicationto define including object lifetimes (although reference countingsemantics are available to applications), redundancy/fail-over, memorymanagement, dynamic load balancing, and application-oriented models suchas the separation between display/data/control semantics (e.g. seeModel-view-controller), etc. In addition to providing users with alanguage and a platform-neutral remote procedure call (RPC)specification, CORBA defines commonly needed services such astransactions and security, events, time, and other domain-specificinterface models.

FIG. 26 depicts an overview of the system, method, process, and utilityassociated with the liquidation of fly ash. 2700 represents the coalburning power plant industry, regardless of whether or not they areproducing energy that is used, produce a byproduct known as fly ash.Normally considered a waste product, fly ash is not only costly totransport but costly to store due to environmental regulation. Theseproducers of fly ash may sell or willingly distribute the waste to otherpotential owners who may store the product.

The unique process developed by the applicants, can extract a pluralityof rare earth metals and other valuable mineral products. These rareearth metals and other products can be commoditized and sold onexchanges for liquidation. Producers and owners of stockpiled fly ashmay engage in a “feedstock agreement” 2620 encompassing theproducers/owners commitment to subscribe to the exchange 2600 allowingrelease of feedstock for subsequent processing and sale of products. Asubscription allows the subscriber to move fly ash from their storagefacilities to process 2675 for producing a portfolio of valuable mineralproducts, including but not limited to rare earth metals, fertilizer,and various industrial chemicals. This subscription begins the processof eventual liquidation.

After the subscription agreement 2620 is established between registrantand an owner or producer of fly ash, the fly ash may be stockpiled 2650at either the registrant's facility or left in place at the owners sitefor eventual extraction. Each individual shipment, or allotment of flyash can be logged into a distributed ledger 2650. A hash code 2660 mayrepresent a specific shipment/allotment and may track the shipmentthrough the procurement process.

In order to quantify the composition of individual shipments/allotmentsstored within 2650, each shipment/allotment may be randomly sampled andanalyzed. The resulting analysis is an inventory of the minerals andmetals found within the fly ash. The ledger holding the hash coderepresenting an individual shipment/allotment may be amended to includea relative composition. A random sample 2612 of fly ash is sent to a lab2610 for analysis to determine the shipment's/allotment's value in theform of an assay 2611. The assay results may be correlated to the spotrate of the commodities contained therein.

The processes 2675 may be predicated on the use of one or more SmartContracts. Smart Contracts are computer protocols intended tofacilitate, verify, or enforce the negotiation or performance of acontract. Many contractual clauses may be made partially or fullyself-executing, self-enforcing, or both. The aim with smart contracts isto provide security and traceability that is superior to traditionalcontract law and to reduce other transaction costs associated withcontracting.

Smart contracts have been used primarily in association withcryptocurrencies. The most prominent smart contract implementation isthe Ethereum blockchain platform. Once the composition of the fly ash isdetermined, a smart contract system 2607 logs the value of thecommodities based on the spot rate of the commodity composed therein.The smart contract architecture can also incorporate specific contractdirection that a subscriber may dictate as part of an order.

This spot rate is used to price the shipment of commodities associatedwith the fly ash. A value representing the shipment's specific value isamended to the shipment's hash code stored within the distributed ledger2660.

The embodiment of the process of receiving an input of fly ash 2675 andoutputting a tradeable commodity 2644, logged with a hash code; wherethe Hash code is the same as a hash function. A hash function is anyfunction that can be used to map data of arbitrary size to data of fixedsize. The values returned by a hash function are called hash values,hash codes, digests, or simply hashes. One use is a data structurecalled a hash table, widely used in computer software for rapid datalookup. Hash functions accelerate table or database lookup by detectingduplicated records in a large file.

The stockpiled fly ash 2650 is sent to the process stage 2675; theapproaches and processes for extracting commodities from fly ash will becontained in the first CIP and co-pending application following thisapplication and covered in much greater detail. An appliance 2665 iscollocated with the process control system of 2675 in order to controland manage the global supply chain of the fly ash through the chemicaland physical processes of extraction, generally 2640 through 2676.

Further, 2665 facilitates the methods used to track the material forcontinue updating into the ledger within each stage to transactionalchange. The appliance adjusts the location value associated with thehash code 2660 representing a shipment of fly ash. The appliance alsohas the ability to label the outputs from the process as unique 2642,2643, 2644, 2645. The entire supply chain is embodied therein. Thesupply chain is further defined as the process of process control,distribution of product, distribution of regents, and executing thechain of custody of the product.

2640 is the embodiment of the chemical and physical processes for theprocurement of commodities and rare earth metals from fly ash. Theprocesses contained within 2641, 2642, 2643, 2644, 2645, 2660 are thevarious steps within the process. Shipments of the fly ash are inputinto the system. Tracked by a hash code associated with 2660, theshipments move through the processes 2641, 2642, 2643 and are turnedinto commodities and rare earth metals. At the end of the processes, thecommodities and rare earth metals produced are given unique hash codes2644, 2645. The hash codes are used as representation of the items onthe exchange platform 2600. The hash codes are amended to the ledgercreating the tradeable commodity.

The first step in the process of converting a shipment of fly ash tocommodities and rare earth metals is the extraction of one or moreproducts. Each sub-stage contained within the process 2641 is controlledvia a smart contract object 2660. The smart contract object 2660 isdriven by data received from the smart contract appliance 2665, and thevarious data inputs from the exchange platform 2600 and provides variousprocess control inputs associated with, but not limited to, the optimalpumping rate, stir rate, mixture ratios, amounts, and volume to maximizeefficiency of processing system 2675.

Receiving the output from the first step in the procurement process2641, a first option is to store the resulting products. Processintermediates may also be stockpiled for future use in process 2643.

Contaminants may be removed to create purified products which may bedistributed to steps 2642 and 2643 improving the efficiency ofextracting rare earth metals. The whole process is logged continuouslyby an appliance or appliances 2665 monitoring the supply chain.

In the event that the process intermediate is received by 2641 is notdecided for storage 2642, the product will enter the procurementprocess. Through a proprietary chemical leaching solution, the productentered into this stage is transformed into rare earth metals. There aretwo outputs from this process: rare earth metals 2644 and an excessproduct 2645 that has the opportunity for future refinement but noimmediate value. The excess product in 2646 will be moved to a similarstorage facility as the product given to 2642.

Rare earth metals extracted from the chemical leaching solution 2643 areeach assigned a new unique hash code. These hash codes are used toliquidize these commodities on a proprietary exchange 2600. Thecommodities created 2676, 2677, 2678 are shipped to their finaldestinations through the use of various supply chain fulfillment methods2691, 2682. The excess product created is moved to a storage area 2642with the potential for later refinement.

The smart contract application 2607 receives data from the exchangeplatform 2600 and acts as a guide for the exact specifications ofproduction outlined in the embodiment included with the process control2640, 2665. The smart contract application also creates tradeablederivatives that are based on the rare earth metal commodity outputs2644 from the refinement process 2643.

In an embodiment of the proprietary exchange itself will operate andfluidly maintain a distributed network through a plurality of micronetworks amongst its users. The micro networks will operate transactionswithin a small number of users. This increases the speed and efficiencyof the exchange network. At predetermined time intervals, each user willsend their most up to date chain of transactions representing the netchange in assets over the time-period to a centralized exchange forcompilation and the other networks of users. The centralized exchangemay document and store the complete ledger in order to mitigate thethreat of fraudulent transactions. The exact specifications anddefinition of the transactions are defined therein. The system may bepeer-to-peer and transactions can take place between users directly,without an intermediary. These transactions may be verified by networknodes and recorded in a distributed ledger that houses hash codesrepresenting the commodity. When a transaction is made between twoparties, a block in the ledger is updated when two or more entities notinvolved in the transaction authenticate a trade. Once a trade isauthenticated, an object (currency, stock, etc.) changes ownership. Thisnegates the need for a physical transferable object.

Market participants may subscribe to the exchange platform 2600 in orderto trade commodities.

In a non-limiting example of the Tokenization process, FIG. 27 depictsblock 2800 as a distributed data base record that stores what is calleda distributed ledger 2801. The distributed ledger has two faces, aprivate face and a public face. The private face belongs to theexchange's owner and is used as a way to keep notes and private datasecure from the public side. The ledger is created upon creation of aToken. The Token represents a present value of the underlying asset. Asfurther example, a feedstock agreement is established at T₁ anddocumented in a datagram 2799. Datagram 2799 is then transmitted througha proprietary and secure network to the exchange 2600 for logging in thedistributed ledger 2800. Once established, the ledger then publishes tothe public side of the ledger a first posting in what would otherwise beknown as the Blockchain for the asset. The asset has a value, but it isunknown at this point. At T₂ the commodity is evaluated, and, in thecase of a mineral, sampled 2804, assayed, and documented at 2802. Eachach step is transmitted securely to the exchange, noting the ledgerrecord it pertains to, is then sent to the distributed ledger databaseand entered as a new entry to the Blockchain, each entry represent avalue change in the process of the underlying commodity, again in thiscase a mineral bearing substance.

At some point in the asset life, the commodity is designated to fulfil asupply contract also known as a smart contract. The smart contract isestablished with milestones that are or must be achieved throughout itsprocess life. The smart contract is managed by the exchange owner aspart of the exchange services; fees for this are paid directly to theexchange. All transactions created in the above process are sent to thedistributed ledger and logged to either the public or private sidedepending on the records type.

As discussed earlier, the smart contract 2607 has the ability to executecertain tasks automatically, once the buy signal is released based on abuyer, the ledger sends a notification to the smart contract theinitiate the process 2675 and process the raw materials per the ledgersrecords, i.e., gold, platinum, or bananas into banana bread, it makes nodifference to the over lying control process and smart contract.

The smart contract 2607 sends an authorization the plant controlprocessor 2640 running in appliance 2665. Logic software 2660 acceptsthe instruction and initiates the process. The acceptance of thisprocess initiation is a one way event, there is no going back. As anexample, assume the underlying process is to process cattle into beef,once the cow enters the stock yard, and processing plant, there is nogoing back, the process is committed to.

Steps 2641, 2642, 2643 each generate a data record of the process, theserecords as with the others is passed out of the plant to the plantcontrol, and logged into the distributed ledger 2800 as a new record.Each phase of the process from start to finish may, or may not representa value change, only the predetermined terms and conditions of the smartcontract will affect value.

Next, the refined commodity is labeled and shipped. As an example,Product A could be sand in the form of silicon dioxide, Product B 2677could be iron, and Product C 2678 could be gold, each by the smartcontract will be individually reported back to the ledger as a processevent, in the case of the formation of a finished product, the valuefrom the smart contract will reflect in the record e.g. 2811, 2812,2813.

In the final step 2900 fulfillment and distribution, the smart contract2607 may have instructions to release funds on the shipment of theproducts FOB the shipping dock, that would mean, the asset owner, allthe way down to the plant owner gets paid, the token is terminated anddisbursed per the smart contract. Any services agreements, truckingagreements, e.g. 2681 and 2682 for transportation are paid as well. Inone final step, the end user, consumer consumes the product, and reportsback to the exchange through a partner data base, the product is gone,and needs more product, the cycle is repeated, the smart contract isestablished, and the next batch of product is processed.

A centralized network of servers may manage the distribution andshipping network of the rare earth metals. A distributed ledger offersunparalleled accuracy in supply chain management, consistentlymaintaining an accurate location in the process. It may limit orcompletely negate the potential loss of material in the process andfurther develop the intricate system.

In trading and sales operations, quantitative analysts work to determineprices, manage risk, and identify profitable opportunities. Historicallythis was a distinct activity from trading but the boundary between adesk quantitative analyst and a quantitative trader is increasinglyblurred, and it is now difficult to enter trading as a professionwithout at least some quantitative analysis education. In the field ofalgorithmic trading it has reached the point where there is littlemeaningful difference. Front office work favors a higher speed toquality ratio, with a greater emphasis on solutions to specific problemsthan detailed modeling. FOQs typically are significantly better paidthan those in back office, risk, and model validation. Although highlyskilled analysts, FOQs frequently lack software engineering experienceor formal training, and bound by time constraints and business pressurestactical solutions are often adopted.

Algorithmic trading, also called algo trading and black box trading,encompasses trading systems that are heavily reliant on complexmathematical formulas and high-speed computer programs to determinetrading strategies. These strategies use electronic platforms to entertrading orders with an algorithm which executes pre-programmed tradinginstructions accounting for a variety of variables such as timing,price, and volume. Algorithmic trading is widely used by investmentbanks, pension funds, mutual funds, and other buy-side (investor-driven)institutional traders, to divide large trades into several smallertrades to manage market impact and risk.

Algorithmic trading may be used in any investment strategy or tradingstrategy, including market making, inter-market spreading, arbitrage, orpure speculation (including trend following). The architecture andfunctionality of smart contracts allow for the incorporation ofsubscriber strategies that apply algorithmic trading methods. Theinvestment decision and implementation may be augmented at any stagewith algorithmic support or may operate completely automatically.

Many types of algorithmic or automated trading activities can bedescribed as high-frequency trading (HFT), which is a specialized formof algorithmic trading characterized by high turnover and highorder-to-trade ratios. As a result, in February 2012, the CommodityFutures Trading Commission (CFTC) formed a special working group thatincluded academics and industry experts to advise the CFTC on how bestto define HFT.

HFT strategies utilize computers that make elaborate decisions toinitiate orders based on information that is received electronically,before human traders are capable of processing the information theyobserve. Algorithmic trading and HFT have resulted in a dramatic changeof the market microstructure, particularly in the way liquidity isprovided.

Next generation trading platforms may require information about thetrading environment, and the relationship to them. The performance ofthe described trading platform using cryptographic hashes and smartcontracts provides the opportunity to limit market contagion resultingfrom HFT techniques, where a feedback spiral emerges with no apparentexternal cause. This information may be generated from multiple sourcesto include data from social media, global predictions, etc. These datasources may generate information about the environment includingmeasurements and measurement classification. These systems are similarto those in planetary physics.

The process of trading is not much different today then is was 30 yearsago, just incredibly faster; features or applications are specified fora desired software product they are coded in any one of a number oflanguages, competitively purchased; integrated into an existingecosystem; and implemented as another product. If another feature isdesired, it is integrated into yet another application or code block;this approach is referred to as “federated” systems. A key tenant to lowcost systems in the future may be a deliberate movement away fromfederated features and systems, to fully integrated systems design andintegrated systems.

Now with a focus on active this new platform, the data required tosupport new trading features are to some extent common; a data type 1;data type 2. In either case, simply sharing data from the disparate datasources to improve knowledge of the trading environment requiresre-thinking how disparate data can be processed, in particularconsideration for the fusion of data into information.

Those skilled in the art of state estimation, robotics, advanced defenseavionics understand academically that data-fusion is the art ofcombining data or data derived from disparate sources such that theresulting information is in some sense “better” than would be possiblewhen these sources were used individually. This process is predicated onthe covariance (or the measure of how much two variables vary together)of non-independent sources. The term “better” in the case above can meanmore accurate, more complete, more dependable, or refer to the result ofan emerging view or state estimation.

The data sources for a fusion process are not specified to originatefrom identical sources which may or may not be spatially and temporallyaligned. Further one can distinguish direct fusion, indirect fusion andfusion of the outputs of the former two. Direct fusion is the fusion ofdata from a set of heterogeneous or homogeneous data sources and historyvalues of data, while indirect fusion uses information sources like aprior knowledge about the data and human input. Sensor fusion is alsoknown as information fusion through an implementation of the probabilitytheory.

Probability theory is the mathematical study of phenomena characterizedby randomness or uncertainty. More precisely, probability is used formodeling situations when the result of a measurement, realized under thesame circumstances, produces different results. Mathematicians andactuaries think of probabilities as numbers in the closed interval from0 to 1 assigned to “events” whose occurrence or failure to occur israndom. Two crucial concepts in the theory of probability are those of arandom variable and of the probability distribution of a randomvariable.

Implementing the features described above with data available requiresreliable real-time estimates of system state. Unfortunately, thecomplete state is not always observable. State Estimation takes all thedata obtained and uses it to determine the underlying behavior of thesystem at any point in time. It includes fault detection, isolation andcontinuous system state estimation.

There are two parts to state estimation: modeling and algorithms. Theoverall approach is to use a model to predict the behavior of the systemin a particular state, and then compare that behavior with the actualmeasurements from the instruments to determine which state or states isthe most likely to produce the observed system behavior.

This is not well understood or currently widely implemented in thetrading industry, today the majority of systems, algorithms used orunderstood and practiced is that logical decisions made linearly anddeterministically. If use cases require higher confidences in specificdata sets, the data sets need to be better resulting in the undesiredeffect of additional cost and schedule increases. The tradingenvironment today is neither linear nor deterministic; use cases areinfinite; and the perverse variability of the data and potential changescannot be modeled. The variability of the problem identified aboveincludes aspects other than just spatial; temporal relationships arepart of the fundamental intellectual structure (together with space andnumber) within which events must be sequenced, quantify the duration ofevents, quantify the intervals between them, and compare the state ofobjects.

Sharing information and data with other applications is anticipated anddesired; however data received and reported is historical in nature andreceived asynchronously. Timing errors can induce more error in thesystem than bad data. These and other issues can be addressed with theintroduction of a suite of algorithms based on re-thinking the approachof federated applications and focusing on an integrated systems solutionbased on state estimation.

With respect to systems design, methods and tools must be developed tosupport the inevitable evolution about to happen in the global tradingindustry, an evolution from federated systems to fully integrated; thetrading industry is not ready nor are they aware of the steps required.As it stands today, there is much art published documenting the researchand development in the area of procedure analysis and design. Thispatent describes a system and methods necessary to implement amethodology that may facilitate and support advanced trading systemsdesign, test, verification, and validation.

For the sake of convenience, the operations are described as variousinterconnected functional blocks or distinct software modules. This isnot necessary, however, and there may be cases where these functionalblocks or modules are equivalently aggregated into a single logicdevice, program or operation with unclear boundaries. In any event, thefunctional blocks and software modules or described features can beimplemented by themselves, or in combination with other operations ineither hardware or software.

Having described and illustrated the principles of the systems, methods,processes, and/or apparatuses disclosed herein in a preferred embodimentthereof, it should be apparent that the systems, methods, processes,and/or apparatuses may be modified in arrangement and detail withoutdeparting from such principles. Claim is made to all modifications andvariation coming within the spirit and scope of the following claims.

What is claim is:
 1. A system to protect financial information,comprising: a distributed network; a processor to: use an ORB proxy tobind a communication down to the distributed network, and transferinformation between a first independent user and a second independentuser, wherein the transferred information is at least one of protectedand privileged, and wherein the transferred information is restrictedfor use within the distributed network.
 2. A method to protect financialinformation, comprising: identify at least one independent user; use adistributed network; use a processor to: use an ORB proxy to bind acommunication down to the distributed network, and transfer informationbetween a first independent user and a second independent user, whereinthe transferred information is at least one of protected and privileged,and wherein the transferred information is restricted for use within thedistributed network.